A caution: if the family member receiving the shares is also an employee of the company at the time of transfer, the HM Revenue & Customs (HMRC) may challenge it — arguing the benefit arises from employment (thus treated as employment income) rather than a genuine gift.

2. Purchase of Shares by the Company: Advanced Family Business Succession Tax Planning

Another effective route in family business succession tax planning is for the company itself to buy back the owner’s shares.

This is particularly useful if the retiring owner needs cash for retirement and also wishes to keep the business in the family.

If the company has built up reserves, it can fund the purchase of the owner’s shares from its own resources.

Advantages include:

• The payment to the owner is treated as a capital disposal (not a dividend), which means CGT rather than income tax applies.

• This may enable the retiring owner to benefit from Business Asset Disposal Relief (BADR) — formerly Entrepreneurs’ Relief.

• The family can retain ownership without needing to raise large sums externally.

Updated 2025/26 rule: From 6 April 2025 the BADR rate has increased from 10% to 14% for qualifying gains. It is scheduled to rise further to 18% from 6 April 2026.

To qualify you still must meet the relevant conditions: ownership of the shares, employment/directorship in the company (or group), and a holding period (typically 2 years) for the relevant shares.

3. Using a Trust: Effective Family Business Succession Tax Planning

If the intended recipients of the business are minors, or if the current owner wants to maintain voting control while reducing exposure to IHT, transferring shares into a family trust can be a component of family business succession tax planning.

Provided the shares have been owned for at least two years, the gift may still qualify for 100% BPR.

From the owner’s perspective:

• The transfer may be an exempt Potentially Exempt Transfer (PET) for IHT if the donor survives seven years.

• If BPR is claimed then the value may fall outside the donor’s estate altogether on death.

• BPR rules allow the donor to retain up to 51% of the shares personally and gift the remainder into a discretionary trust, allowing future family members to benefit while control remains with the donor.

Important 2025/26 update: From 6 April 2026 the rules for BPR will change significantly: the first £1 million of combined assets qualifying for BPR/APR will still attract 100% relief, but any amount above £1 million will only attract 50% relief.

There is also a consultation underway on how to apply these changes to trusts and lifetime transfers.

If you are family business succession tax planning goes down this route you should act now to lock in the existing position.

4. Why Family Business Succession Tax Planning Matters — and What’s Changed for 2025/26

When you plan for family business succession tax planning you’re not just arranging for the business to stay within the family — you’re also seeking to minimise tax drag and preserve value for the next generation.

Key reasons why this family business succession tax planning matters include:

• To control the owner’s exposure to CGT and to maximise the use of reliefs such as BADR.

• To reduce IHT on the eventual transfer of wealth.

• To structure the business so that the next generation can take over without being overwhelmed by tax liabilities or funding challenges.

• To ensure the control, governance and financial strength of the business remain stable through the transition.

Key changes to note for 2025/26:

• As noted, the BADR rate increases to 14% from 6 April 2025, rising further to 18% in 2026.

• The rules for BPR are set to change from 6 April 2026, with the £1 million cap on full relief and 50% relief above that threshold.

• The concept of domicile for IHT is being replaced by residence-based rules from 6 April 2025.

• For trust transfers and lifetime gifts, anti-forestalling provisions apply from 30 October 2024 leading up to the changes in 2026.

Because of these changes, now is the time to take action if you’re conducting family business succession tax planning. With the clock ticking, early planning can be far more effective than reactive structuring.

5. How Trueman Brown Can Help

At Trueman Brown, we specialise in supporting local, family-run businesses with expert tax and accountancy advice — especially for succession planning.

If you’re thinking about retiring or stepping back and passing your business to the next generation, we can help you with full family business succession tax planning:

• We’ll assess your business structure, shareholding, tax position and family circumstances.

• We’ll help you weigh options such as gifting shares, a company share buy-back, or setting up a family trust.

• We’ll keep you ahead of the rule changes (e.g., BADR rate rise, upcoming BPR reforms) so you maximise your reliefs.

• We’ll work with you to prepare the paperwork, valuations, trust structuring, and tax filings.

For tailored advice, please get in touch:
Email: mark@truemanbrown.co.uk
Phone: 01708 397262

6. FAQ

Q: What is the minimum holding period for shares to qualify for BADR in family business succession tax planning?
A: For shares in a trading company to qualify for BADR you must usually have held them for at least two years, be an employee or officer of the company (or group), and hold at least 5 % of the ordinary share capital and voting rights.

Q: If I gift shares to my child, will I pay CGT on the gift as part of my family business succession tax planning?
A: Gifting shares is treated as a disposal for CGT purposes, so you will need to consider whether you have a chargeable gain. However, reliefs and allowances may apply, and the gift may also reduce your IHT exposure.

Q: How do the upcoming changes to BPR affect my business succession plans?
A: From 6 April 2026 the first £1 million of business and agricultural property eligible for BPR or APR will still attract 100 % relief, but any excess will only receive 50 % relief. If your business or assets exceed that threshold, you may face a larger IHT liability unless you act now.

Q: Can I transfer shares into a trust and still claim BPR as part of family business succession tax planning?
A: Yes — if the shares have been held for at least two years and meet the trading company tests, a gift into a trust may qualify for 100% BPR at present. But given the upcoming changes, timing and structure are critical.

Q: What happens if the family member receiving shares is also an employee?
A: HMRC may argue that the value received is essentially employment income rather than a gift, which could trigger income tax rather than CGT. It’s therefore important to ensure the transfer is genuine and structured carefully.

Q: With the BADR rate increasing to 14% from April 2025, should I delay a disposal until later?
A: Typically no — the earlier relief at 10% will be lost from 6 April 2025. If you are planning a disposal, acting before that date may be beneficial. However, you should always take personalised advice before making decisions.

Q: How can Trueman Brown help me navigate all this?
A: With our expertise in working with small and medium-sized family businesses, we provide end-to-end support in family business succession tax planning: from valuations, share structuring, trust set-up, relief eligibility assessment, to implementation. Contact us at mark@truemanbrown.co.uk or 01708 397262 for an initial discussion.